Ronald Fatoullah & Associates - Elder Law

Highlights of the New Tax Law

Highlights-of-the-New-Tax-Law-Dplic-39996857-270x179.jpgBy Ronald A. Fatoullah, Esq. and James A. E. Asquith, Esq.

{2:00 minutes to read} On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act into law. This law is the biggest change to our system of taxation in more than 30 years. Below are just some key highlights of the new law.

Estate Taxes: Effective January 1, 2018, the federal estate tax exclusion "unified credit" amount was doubled to $11.2 million per person ($22.4 million for married couples, with proper planning). That means that if an individual dies with a taxable estate of less than $11.2 million (assuming no prior gifting), a federal estate tax will likely not be due. However, it is important to note that while the federal estate tax exclusion is being doubled, many states, including New York, have their own state estate tax. Therefore, when engaging in estate planning, care should be given to the relevant state estate tax exclusion amount. Moreover, under the new law, the federal exclusion amount reverts back to the current base rate of $5 million (indexed for inflation) in 2026. Because of this short window, it may be wise to discuss estate tax planning with an attorney.

State and Local Tax Deduction Limitation: The new law limits the deduction for state and local taxes to $10,000 (this includes both property taxes and state income taxes). This will have a large impact on taxpayers in high income and property tax states, such as New York.

New Income Tax Brackets: Under the new law, the seven income tax brackets remain, but the rates have changed as follows:

Tax RateIndividualsMarried filing Jointly
or Surviving Spouse
Married filing
Head of
10% $1 to $9,525 $1 to $19,050 $1 to $9,525 $1 to $13,600
12% $9,526 to $38,700 $19,051 to $77,400 $9,526 to $38,700 $13,601 to $51,800
22% $38,701 to $82,500 $77,401 to $165,000 $38,701 to $82,500 $51,801 to $82,500
24% $82,501 to $157,000 $165,001 to $315,000 $82,501 to $157,000 $82,501 to $157,500
32% $157,001 to $200,000 $315,001 to $400,000 $157,001 to $200,000 $157,001 to $200,000
35% $200,001 to $500,000 $400,001 to $600,000 $200,001 to $300,000 $200,001 to $500,000
37% over $500,000 over $600,000 over $300,000 over $500,000

Standard Deduction and the Elimination of the Personal Exemption: The new law roughly doubles the standard deduction, but it abolishes the Personal Exemption. The standard deduction has been increased as follows:

  • From $6,350.00 (2017) to $12,000.00 (2018) for individuals;
  • From $12,700.00 to $24,000.00 for married filing jointly and surviving spouses; and
  • From $9,350.00 to $18,000.00 for Heads of Household.

However, due to the elimination of the Personal Exemption, which in 2017 permitted taxpayers to claim a deduction for themselves, their spouses, and their dependents, the doubling of the standard deduction may not be as significant a tax cut as it appears to be.

Section 529 Plans: Under the new law, distributions from 529 plans can be used to pay tuition and other expenses at elementary, secondary, and religious schools. Under the prior law, the distributions were traditionally limited to post-high school education. However, it is important to also consider how New York State will treat 529 plans before using such accounts to pay for K-12 tuition expenses.

In addition to the provisions described above, the new law contains many other modifications.

To better understand how the new tax law will affect you, your family or your business, you should consult an attorney or tax professional.

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. James A. E. Asquith is an elder law attorney with the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll-free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also a partner with Advice Period, a wealth management firm, and he can be reached at 424-256-7273.

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